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Tiny Slovakia roils markets

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economy_6 October 12, 2011 (Chinavestor) Investors have enough on their plate without Slovakia complicating European rescue efforts. First of all, U.S. economic recovery remains frail due to high unemployment and mounting government debt. Europe got a debt crisis where Greece has been unable to make good on bond payments had it not been for rescue packages. And when finally Europe set it right, a tiny country within the eurozone blocks it.

The good news is that most likely Slovakia will pass the rescue package, all yesterday's vote was a Slovakian domestic political showdown. Mrs. Radicova, head of Slovakia's ruling coalition, offered her cabinet's resignation should the vote not pass parliament. That was the best news opposition parties could hope for to boot the current coalition government. And that's what they did, blocked the vote.

Chances are that members of the Parliament will quickly pass the Euro rescue fund vote without a majority government. Going forward, it can be eitherĀ a new coalition government that will do it or a new election will be held.

Nevertheless the case represents the problem Europe faces when dealing with 17 different countries. Europe is not federalist and thus any significant decision has to be approved by each and every member of the block. This makes Greek rescue efforts even more difficult - though Europe has the means to solve it!

ECB has tools to avert Greek default

For now, investors will have to live with elevated market volatility. Thank you Slovakia and like-minded politicians.



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